Below is a daily chart of Union Pacific Corporation (UNP), $102.33.
Trade: Under $101.70, consider buying Aug (8/18) $106/109 bear put spread (15 DTE) at mid-point (closed at $3.52/share).
Technical Setup: Breakdown all time frames, and will be failed W Formation Daily if triggers.
Option Strategy: Bear Put Spread (BPS). A defined risk strategy where you make the maximum profit if the stock closes below the shorted put strike at expiration. We buy bearish puts and then sell a put strike price lower where the price pattern suggests that the stock will not close under at expiry to reduce the cost of the long put and generate time decay.
The return on investment (ROI) is the Gain divided by the Debit, which is the maximum loss. The break-even is the higher strike price plus debit paid. Considered a mildly bearish strategy since we are not buying puts or shorting stock and willing to cap our gains in exchange for gain from time decay.
Max Gain on Call Spread: Credit received. Cost basis if assigned is lower strike plus Credit.
Stop Loss: $104.22.
Below is a daily chart of Cisco Systems, Inc. (CSCO), $31.52.
Trade: Consider selling the following $1.50-wide Iron Condor: sell Aug (8/18) $32.5/34 bear call spread and sell Aug (8/18) $30.5/29 bull put spread (15 Days to Expiration (DTE)) for around current closing mid-point of $.38/share.
Technical Setup: Range bound, time decay strategy into earnings (although slight bearish bias).
Option Strategy: Iron Condor (IC). Simply, is selling both an out-of-the-money Call Spread and an OTM Put Spread. Defined risk strategy used when you expect a stock to stay range bound by expiration. You make maximum profit (net credit received) if the stock closes between the short strikes at expiration.
The return on investment (ROI) is the credit received divided by the maximum loss (i.e., width of strike prices of the largest spread less total premium received). The break-evens are the short put strike price less credit received and the short call strike price plus credit received (i.e., also your cost basis if assigned the stock).
Considered a neutral strategy since we are expecting range bound activity. Trade has positive theta (meaning you make money on time decay) making it a high probability trade since we time entry with the technical pattern.
Max Gain: Credit received, 34% ROI ($.38/1.12) if expires worthless.
Stop Loss: $30.58 on downside; $32.52 on upside, close entire position.
Below is a daily chart of The Goldman Sachs Group, Inc. (GS), $226.27.
Trade: Consider selling the following $10-wide Iron Condor: sell Aug (8/18) $232.5/242.5 bear call spread and sell Aug (8/18) $217.5/207.5 bull put spread (15 DTE) for around current closing mid-point of $1.29/share.
Technical Setup: Range bound, time decay strategy into earnings (although slight bearish bias).
Option Strategy: Iron Condor (IC).
Max Gain: Credit received, 14.8% ROI ($1.29/8.71) if expires worthless.
Stop Loss: $217.98 on downside; $231.22 on upside, close entire position.
Adjustments and Comments on Open Advisory Letter Trades Note: Our Trade Updates are timely posted in a separate Report in the Member’s Area. Please see that document for a current reflection on all Open and Closed Trades since the spreadsheet updates immediately and will always be more current than this e-mail update. Thank you.
NOTE: Please see Master Trader Guidelines for Trading the Open and Gaps in Member’s Area for rules on trade entry, gaps, etc.
Happy trading! If you have any questions or comments, please e-mail Greg Capra at Greg@mastertrader.com or Dan Gibby at Dan@mastertrader.com
All the best,
Greg Capra
Managing Director and Pristine Founder
Dan Gibby
Chief Options Strategist
Chief Options Strategist
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NOTE: Master Trader will show opening and closing prices of all stock and option trades. We do not recommend proper share size for your particular trading style, risk tolerance, or account balance. We urge you to calculate your own share size based on your individualized risk parameters, Trading Plan, and familiarity with the proposed trade strategy and risk.
NOTE: Master Trader and its representatives might have existing positions in these and other trade recommendations before or after suggested herein. Additionally, we often manage them differently for internal purposes based on different risk parameters than noted herein.
